Economic Trends of the 2010s (Graphs of the Decade)

Economically, the 2010s were a disappointment. Now, the U.S. economy went the full 10 years without a recession, a first in history. However we began the decade at the bottom of the worst recession in a long time. As such much of the decade was about regaining the lost ground. That means we spent most of the decade below potential, with a slack labor market and the like. It is true that today’s economy is strong, and that should be celebrated. Rarely has Oregon seen better economic conditions than we do today. However today’s strength alone does not negate nearly a decade, actually nearly two decades of general weakness. That’s why, when taken as a whole, the 2010s were an economic disappointment.

Beyond the general business cycle fluctuations of starting off the decade in bad shape and ending it in good shape, three trends stand out. I’m submitting these as my Graphs of the Decade to best understand the economy of the 2010s.

First, household incomes are setting new record highs on an inflation-adjusted basis. This is not just about recovering the losses from the Great Recession. Rather the importance is putting Oregon’s income gains in perspective relative to the nation and relative to recent history. For the first time in at least 50 years, Oregon’s median household income is higher than the U.S. And assuming another solid year of income gains in 2019, Oregon will end the decade with inflation-adjusted household incomes somewhere around 13% higher than they ever have been before. This means our vantage point today should be high enough to finally break through the malaise of stagnant household incomes in recent decades, even after the next recession, whenever it comes. This potential development is massive, and largely due to the strong labor market in which we are ending the 2010s.

Encouragingly we know growth has now reached every sector of Oregon’s economy, every region of the state, and all populations as evidenced by the narrowing racial poverty gap. That said, we also know the growth in the 2010s has been uneven across the state. Our own experiences vary based upon where in the state we actually live. The second big trend of the decade is the growth in the urban-rural divide.

Economically, the Great Recession was an equal opportunity disaster. However the nation’s biggest, most diverse regional economies were the first to return to growth and recover. Even beyond these general patterns, Portland’s growth has been transformational as it outpaced all but a few other metro areas in terms of things like increases in educational attainment, household income gains, and growth in the number of high-wage jobs.

The state’s other metro areas spent a few years at the bottom of the Great Recession with no growth. However as the housing market recovered, migration flows returned, and public sector budgets were repaired, overall economic growth resumed. Keep in mind that Bend and Medford experienced two of the worst housing bubbles and busts in the nation, so they began the decade in very bad economic shape.

It took another couple of years for these patterns of growth to reach the entire state. Rural Oregon overall basically spent half the decade seeing no gains but has seen solid growth the past handful of years. That said, just 9 of Oregon’s 23 rural counties have more jobs today than they did last decade. Encouragingly, rural Oregon has very few places in permanent demographic or economic declines relative to patterns seen throughout the country. However, even with decent to solid growth in rural Oregon overall, the state’s urban-rural divide increased in the past decade.

Finally, the third major economic story of the 2010s is housing affordability, which worsened throughout much of the decade. We know this impacts all corners of the state and populations. It is both a near-term concern in that it makes it harder for our neighbors to make ends meet, and it is a long-term risk to the outlook if young, working-age households cannot afford to move here in the first place. And while much of the attention is paid to rising housing costs, we know they are the symptom and not the cause of the disease. The chief underlying cause is the ongoing low levels of new construction this decade. On a population growth-adjusted basis, Oregon built fewer new housing units this decade than we have since at least World War II. With data going back nearly 60 years, never have we built fewer new units on a sustained basis than we did in the 2010s.

Update: This received quite a bit of attention. Please see our previous look at how Housing Remains a Macro Issue for more on these trends. They’re not just Oregon-specific. And the Oregon Legislature recently passed bills trying to encourage housing supply.

All told, the 2010s were a bad economic decade. We spent much of the past 10 years simply digging our way out of the Great Recession, which means we underperformed overall. That said we are ending the decade in great shape and with an economy that has rarely been better. It’s a low bar to overcome, but taken as a whole, the 2020s should be better.

Stay tuned, I’ll be back in the New Year with two big picture predictions for the 2020s.

Responses

I think it would be helpful to have a graph of average housing cost as a percentage of average household income, nationally and Oregon, for 2000 through 2019.

Note that even this graph would be skewed because housing cost as a percent of household income overstates the “problem” for high-income households and understates the “problem” for lower-income households.

You know, I don’t have a good Oregon vs US cost comparison off the shelf. I have bits and pieces of it. We’ve done a bit on rural affordability comparisons (see link). But I’ve been meaning to update lower income affordability — specifically comparing incomes and rents at the 25th percentile of the distribution — now that the 2018 ACS data is available to dig into. I’ll post that when I finish.